In app purchase fails only in App Store review

My app has been rejected by the App Store review team with the following reason:

• The app was not able to load the in-app purchase. 

Next Steps

When validating receipts on your server, your server needs to be able to handle a production-signed app getting its receipts from Apple’s test environment. The recommended approach is for your production server to always validate receipts against the production App Store first. If validation fails with the error code "Sandbox receipt used in production," you should validate against the test environment instead.

The thing is I don't validate the receipt using a remote server. I validate the receipt locally in the app. When I test the app in the Sandbox environment I receive a valid receipt and am able to carry out the purchase to completion. I then submitted the binary along with the in app purchases and the reviewer gets nothing back when my app calls SKProductsRequest and looks for products in response in the delegate method

• (void)productsRequest:(SKProductsRequest *)request didReceiveResponse:(SKProductsResponse *)response{

According to Apple's documentation for the remote server validation when the production end point returns no result the end point should be changed to the sandbox. However, I cannot find any mention of what to do in the situation where you are locally validating the receipt. Is it possible to change the environment where the SKProductRequest is made? I suspect not, that's why you have to sign in as a sandbox user.

So, what am I missing here? I see a number of posts about this issue, but no resolution. Here's one example:

https://developer.apple.com/forums/thread/93773